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Chapter Two


Multiple Choice Questions

Organizing Financial Assets

1. The largest single institutional owner of common stocks is:

a. mutual funds.

b. insurance companies.

c. pension funds

d. commercial banks

(c, moderate)

Nonmarketable Financial Assets

2. Which of the following is not one of the characteristics of the primary nonmarketable financial assets owned by most individuals?

a. high liquidity

b. high return

c. often issued by the U.S. government

d. low risk

(b, moderate)

3. Savings accounts are ---------- but are not------------.

a. negotiable; liquid.

b. marketable; liquid.

c. liquid; personal

d. liquid; marketable

(d, easy)

Money Market Securities

4. Series EE bonds must be held at least ------- years in order to receive the guaranteed minimum rate.

a. 3

b. 5

c. 8

d. 10

(b, difficult)

5. Treasury bills are traded in the --------------------- .

a. money market.

b. capital market.

c. government market.

d. regulated market.

(a, easy)

6. Which of the U.S. Treasury securities is always sold at a discount?

a. Treasury bills

b. Treasury notes

c. Treasury bonds

d. All of the Treasury securities are sold at a discount.

(a, moderate7)

7. Which of the following statements regarding money market instruments is

not true?

a. They tend to be highly marketable.

b. They tend to require a small dollar investment.

c. They tend to have a low probability of default.

d. Their rates tend to move together.

(b, moderate)

Fixed Income...